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Praturi & Sriram Charted Accountants

PARTICULARS II RESERVES & SURPLUS

REMARKS

2.1 Whether the Articles of Association contain any restriction on creation of Reserves or impose any restrictions on the powers of board of directors? 2.2 Whether the movements authorized by a resolution of the board of directors? 2.3 Whether all movements in the reserves between the previous year and the current year properly disclosed in the accounts? 2.4 Is it ascertained whether reserves are required to be created in the following circumstances? (a) General Reserve is statutorily required to be created under the The Companies (Transfer of Profits to Reserves) Rules, 1975 whereby if a certain amount of dividend is proposed to be declared, then certain amount of profit has to be transferred General Reserve. (U/s 205 of the Companies Act, 1956) (b) To create any reserve in accordance with any contractual obligations, such as debentures issued whereby Debenture Redemption Reserve is created. For listed companies in terms of guidelines for the protection of interest of debenture holders contained in section N of guidelines for disclosure and investor protection issued by SEBI on 11.06.1992, a debenture redemption reserve (DRR) is required to be created by companies raising debentures. Debenture Redemption Reserve may be created in equal annual installments or for a higher amount, if profits so permit. (c) To fulfill statutory requirements, such as on redemption of preference share capital. (d) Revaluation Reserve on revaluation of assets, which should be separately disclosed. (e) To create special reserves under any other statute. 2.5 Is it ensured that all reserves that have outlived their purpose have been transferred to the profit and loss account? 2.6 Are the reserves free to be distributed by way of dividend? OR Are there restrictions arising from the statute or contractual obligations? Example: Companies Declaration Out Of Dividend Rules. 2.7 Have you reviewed the minutes authorizing the movements in reserves? 2.8 Is there a reserve which is represented by earmarked investments? Whether such a reserve has been shown as a

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